Some speculate that buyers are hesitating because they expect home prices to plunge further. Corbis

August 25, 2010

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Despite hints this summer that the housing market had hit rock bottom, sales of new homes sank to their lowest level since the government started tracking them more than four decades ago, the Commerce Department reported Wednesday. A day earlier, the National Association of Realtors said that sales of previously occupied homes in July took their biggest one-month plunge since record-keeping began, hitting a new 15-year low. How much longer will the housing market continue its slide? (Watch a local report about the housing slump)

Housing could start climbing back almost immediately: The July plunge is not "the end of civilization," say the editors of The Wall Street Journal. It was the predictable result of the expiration of the $8,000 homebuyer tax credit — people who might have bought in July instead rushed their purchases to take advantage of the government's largesse. Such meddling only delays the completion of the "inevitable correction" that has to run its course before things get better. If Washington would let housing hit bottom, it could start recovering — some even predict a rebound in August."The housing mirage"

A year? That's wishful thinking: There's little hope the surplus homes will be gone in a year, says Daniel Indiviglio at The Atlantic. "Given the low rate of sales this summer and consistently high foreclosure rate, inventory will likely continue to grow." Nobody knows how many months of demand were "pulled forward" by the homebuyer tax credit — but until the hangover from that program ends, a housing recovery will remain out of reach."How bad was July's plummet in home sales?"